Assistant Treasurer and Minister for Competition Policy and Consumer Affairs
3 December 2007 - 8 June 2009
Interview with Deb Cameron
Wednesday, 25 February 2009
SUBJECTS: Radio Rentals, responsible lending, corporate restraint
The main thing to know from the past few months is that if you have been living beyond your means, you are in strife. Bad debts the level of bankruptcy personal and business have risen. The value of just about every asset class has fallen because people who've borrowed too much have had to sell, sometimes in a rush, no one today is worth what they thought they were worth this time last year.
It's just a fact. So why when so many banks and businesses and executives have had to hang their heads in shame, have some cashed in from the desperation. What's been happening among the loan sharks the pay day lenders the pawn shops the lenders of last resort?
This morning the Assistant Treasurer Chris Bowen has a household name in his sights. Good morning Mr Bowen.
Good morning Deb nice to talk to you.
Thank you Radio Rentals has advertised 'no credit check month' what do you make of that campaign?
I think it is highly irresponsible. Radio Rentals by their advertising is saying if you come to us this month, we won't check your credit history and that is really targeting people who have had trouble and they may well continue to have trouble, with their debt, and I think it is an open invitation to act irresponsibly. I really think they need to have a really good look at themselves as I've said this morning.
The credit agency, of course, Radio Rentals is lending without a credit check. Is it ever responsible to lend any money to anybody without looking at their means?
No, it's not. Now Radio Rentals claims that this month they're not checking credit histories that they will continue to check existing liabilities.
Now whether that is the case or not, it is highly irresponsible advertising and what we need is the situation where yes, individuals need to show some responsibility and for these lenders in particular, who need to show that they are being responsible in the way they deal with consumers. I don't think Radio Rentals is frankly. I don't think Radio Rentals is alone, I am not singling them out, there are a range of players in this segment of the market but they are the ones this month saying 'no credit check month', no credit history check month and it is highly irresponsible.
What can the government do legislatively or by regulation to prevent this kind of advertising?
We are doing that. The transfer of credit to the Commonwealth is the opportunity to do that. Previously credit has been regulated by the States. It's coming over to the Commonwealth we're going to have for the first time a national responsible lending code which will regulate that sort of arrangement. But the point I am making today in my article in the Sydney Morning Herald is that even the best legislation in the world and we're trying to make it the best - Nick Sherry the responsible Minister is looking closely at the best practice around the world - even the best legislation in the world will have, if people try hard enough, loop holes that people will be able to skirt around. Legislation is part of the answer but really corporate players need to show more responsibility than some have been.
Who do you think they are trying to snare I'm thinking that of your own electorate of course. You are the Member for Prospect; Western Sydney is an area where this kind of consumer debt is causing a lot of trouble is that who they are targeting?
Look I think so and look Radio Rentals says 'well it's appropriate that people should be able to get a fridge or a washing machine if theirs breaks down even if they've got poor credit situation or a poor credit history'.
Now I have a couple of responses to that. Firstly, if you look at the Radio Rentals website a bit target is not fridges or washing machines, its plasma TV screens, Play stations, fitness equipment. Call me old fashioned Deborah but they are not essentials and I think targeting people to say 'come in and effectively borrow from us we'll lease these things to you regardless of your credit history' is irresponsible.
The second point I make is that there are alternatives. Now we all have a go at the banks and I'm no exception occasionally, but there are alternatives out there.
NAB and ANZ have been working with the Brotherhood of St Laurence and the Good Shepherd for low interest and no interest loans for people in that situation who need an essential good, but who do have a poor credit situation and those alternatives; I would encourage people if they are in a tough situation to work through and check them out. If you're interested there's a website www.nilsnsw.org.au where people can go and see what their options are for those no interest and low interest loans.
There are alternatives out there, if you in a difficult debt situation more debt won't be the answer to your problems it will make it worse.
There is also another principle in private enterprise that is let the buyer beware it's the right of a business to find a market to adapt to conditions and perhaps what Radio Rentals and lenders of last resort are doing is simply showing their enterprise?
Well look I support the free enterprise system but there are limits and they have crossed the limits in my view with these sorts of operations. What they're doing is saying 'we'll get the good back, we might take a loss but the big risk is on the consumer' the big risk is on the person who takes on the extra debt. Look as I say at the outset individuals need to show a personal responsibility - it's not all a one way street - but they don't need this encouragement to say come to us this month it's no credit history check month effectively it's a free for all. That is just irresponsible.
The Prime Minister has again today called for wage restraint on both executives and workers in a way we're in a sort of a seamless argument here how critical is this wage restraint?
I think what the Prime Minister has said that everybody, business leaders have said times are tough, everybody knows times are tough and that there will need to be some wage restraint. But you can't expect lower middle income earners to do that unless there is an example set by senior executives and he has simply made that clear and I think he is making quite an obvious point that it's all about the examples people set and the messages that they send.
If senior executives are going to say to their workers 'times are tough we're going to need to show restraint', workers are going to be looking back to say 'what are you doing where's your restraint' and the executives need to have a good response to that.
The responsibility of the corporate centre you've made that clear that is part of what you expect to see, Greg you've had an experience with applying for credit?
No, no, the producers got it wrong. I've got no troubles at all. I'm just a concerned citizen. Just wanted to point something out that I don't think they've made it clear by the Minister.
Irrespective of whether you do a credit check or not you can do a credit check on somebody and they'll have a clean record there is no legislation in place now that forces or compels a lender to look at a common data base that shows what someone's actual liabilities are which could be easily arranged.
So credit checks are one thing, but it's purely an honour system to put down what you actually owe, how many credit cards you have and how much you have outstanding.
Thank you very much Greg. Chris Bowen should there be legislation that requires a lender to consult a central data base of debt?
As I say Deb we are going to bring in a responsible lending code we'll be releasing the details of that shortly. Nick Sherry has been working that through with the consumer groups and it will be for the first time be our national code and it will deal with a lot of those things.
One of things that mainstream lenders have asked for is more information more information on people's credit arrangement, which the government is working through. If they say if we get more information, we can be more responsible. That underlines the irresponsibility of people who don't seem to have an interest in people's credit history or credit situation.
I've had a call from John who says this sort of lending by Radio Rentals and others has been happening for years, what has precipitated your action now?
It's the blatant advertising if you go to the Radio Rentals website the first thing that hits you is a big sign ;no credit history month;. It's just blatant out there come and see us if you have trouble with credit it's open slather that's not acceptable.
Apart from this name and shame later this afternoon when you log onto Radio Rentals Minister and that is still there will you feel that this name and shame has failed and you will have to do more?
Look we do need to do more and that's why we are in terms of the national credit responsible lending regime. I don't expect Radio Rentals to change their behaviour today, but I hope that they do re-examine their behaviour over time and part of what we're doing is the legislature response they took the view as a Minister and a senior political person, that there is a responsibility to point out the irresponsibility of these lenders.
Thanks very much.